3 ways to profit from a weaker Australian dollar

The Australian dollar has continued its decline against the U.S. dollar overnight after the greenback strengthened following the release of U.S. fourth-quarter GDP data which came in ahead of expectations.

According to the Wall Street Journal, U.S. GDP rose at a 2.9% annual rate in the fourth-quarter, compared to expectations of 2.7% growth.

This has left the Australian dollar trading at 76.6 U.S. cents, its lowest level in 2018.

I believe this is the start of even greater declines for the Australian dollar over the next 12 to 24 months as rising U.S. rates cause the U.S. dollar to strengthen at long last.

With that in mind, now could be a good time to consider buying shares which would benefit from a weaker local currency. Three that I like are listed below:

Appen Ltd (ASX: APX)

This machine learning and artificial intelligence dataset provider has been one of the best performers on the local share market over the last 12 months. It isn’t hard to see why. Despite the stronger Australian dollar, in FY 2017 Appen delivered underlying EBITDA of $28.1 million. This was an increase of 62% year-on-year or 73% in constant currency terms. If the Australian dollar weakens I would expect Appen to benefit greatly due to the large amount of revenue generated in North America.

Aristocrat Leisure Limited (ASX: ALL)

This gaming technology company is one of my favourite growth shares on the local share market. I expect it to deliver explosive earnings growth over the next few years regardless of any favourable movements in the AUD/USD cross. But should the local currency weaken, then it could give Aristocrat an extra boost. In FY 2017 approximately 58.1% of its revenue came from the Americas region. I expect an even greater amount will be generated in the region in the future following the recent acquisitions of Plarium and Big Fish.

Integrated Research Limited (ASX: IRI)

I’m a big fan of this provider of performance monitoring and diagnostics software solutions for business-critical computing environments. So too are U.S. companies it would seem. At present all ten of the largest U.S. banks use Integrated Research’s software, as do five of the world’s largest companies. This has unsurprisingly led to a significant portion of its revenue being generated in the Americas. In its half-year results, the company reported revenue of approximately US$24.2 million (A$31.6 billion) in the Americas region, which equates to 69% of its A$45.7 million half-year revenue. If the Australian dollar were to weaken, Integrated Research would almost certainly benefit.

Here are three more top shares that could benefit from a weaker dollar as well.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Appen Ltd. The Motley Fool Australia has recommended Integrated Research Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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